Steve Denning

A 100,000-year historical perspective reveals that human societies repeatedly cycle between periods of progress and crisis, driven by five value orientations: Saints, Value Creators, Self-Dealers, Value-Extractors, and Oscillators. Genuine Value Creators consistently foster flourishing, from early egalitarian communities to modern technological advancements. However, Self-Dealers and Extractors frequently trigger "nuclear winters" through speculation and inequality, as seen in historical booms like canal manias, railway speculation, and the 2008 financial crisis. The article argues that societies often oscillate, but conscious choices towards authentic value creation—prioritizing customer well-being and human flourishing—are paramount for sustained success. This pattern offers a critical lesson for navigating the current AI era, urging leaders to choose a path that avoids past pitfalls and builds a new golden age.

A 100,000-year lens on value creation: Saints, Value Creators, Self-Dealers, Extractors & Oscillators. Golden ages often follow extractive crises. Value creation wins

A recent Harvard Business Review article advocating a return to shareholder value maximization, treating stakeholders as mere 'constraints,' is sharply critiqued as a regression. The author exposes its 'intellectual sleight of hand,' arguing this approach dehumanizes customers into metrics, risking Goodhart's Law and metric-gaming. Despite rhetoric, 'financial gravity' still drives most firms toward short-term gains, as the Business Roundtable's actions showed. However, real-world 'Value Creators' like Costco, genuinely prioritizing customers and employees, consistently achieve superior long-term returns. Conversely, 'Self-Dealers' focused on financial metrics often underperform. The article champions a proven strategy: a clear commitment to creating customer value as the primary goal, with sustainable returns as a natural outcome. This hard-nosed approach, not 'purpose-washing,' is crucial for success, urging a definitive move beyond outdated shareholder primacy.

A new Harvard Business Review article promoting Maximizing Shareholder Value (MSV) faces strong opposition, labeled a dangerous regression. This 1970s concept, driven by Friedman and Jensen, mistakenly tied long-term value to current stock prices, fostering short-term extraction. This approach demonstrably failed, causing job losses, underinvestment, and disproportionate wealth for executives. Despite a 2019 public renunciation, MSV secretly governs 70% of public firms, hindering true economic progress. The author champions "Value Creators" like Microsoft, proving that prioritizing customer and stakeholder value yields superior, sustainable financial returns, urging a definitive move away from MSV's detrimental path.

A critical analysis challenges a Harvard Business Review article's claim that organizational change fails primarily due to a "False Alignment Trap." While internal agreement is important, the critique argues that flawed strategy, weak customer value propositions, and poor market adaptation are more fundamental issues. The HBR article's use of Pandora as a success story is undermined by the company's dismal 10-year shareholder returns, significantly lagging the S&P 500 despite numerous internal "alignment rituals." This exemplifies a broader flaw in management thinking and consulting advice: prioritizing internal process and "transformation theater" over tangible external results and genuine customer value creation. True organizational success requires both alignment and a winning, customer-centric strategy.

This article highlights a fundamental business dichotomy: "Value Creators" versus "Self-Dealers." Henry Ford exemplifies the former, innovating to deliver genuine customer value, democratizing mobility, and generating broad societal benefits alongside wealth. Conversely, advertising pioneer Claude Hopkins represents "Self-Dealers," prioritizing personal and client gain through persuasion without creating new customer value. The piece critiques modern management literature, including a new BCG book, for implicitly endorsing this self-dealing mindset and Maximizing Shareholder Value (MSV) over true customer-centric innovation. It argues that while self-dealing offers fleeting gains, Value Creation is the only sustainable strategy for long-term success and societal well-being, urging businesses and society to embrace the former.

Historically, enduring businesses like Wedgwood, P&G, and Ford consistently built success by prioritizing customer value, trust, and market expansion, recognizing profits as a natural outcome. Management thinkers such as Peter Drucker reinforced this, defining a business's core purpose as creating customers. Yet, the past five decades saw the dominance of 'shareholder value maximization,' an ideology now widely criticized as a short-sighted aberration that fostered short-termism. Modern powerhouses like Amazon and Apple continue to validate the long-term efficacy of deep customer obsession and continuous innovation, proving this enduring approach far more robust than the fleeting MSV doctrine.

Bain consultants are advocating a return to "Managing for Value" (MSV), urging companies to prioritize shareholder returns and treat other stakeholders as mere constraints. This ideology, which gained prominence in the 1970s due to economic crises, Milton Friedman's influence, and agency theory, sidelined Peter Drucker's customer-centric view. Historically, firms fully embracing MSV, like General Electric, often delivered mediocre long-term results and faced decline. In contrast, companies focused on creating customer value, such as Amazon and Apple, achieved sustained success and high valuations. The current revival attempt is driven by higher capital costs and a backlash against ESG frameworks, offering a seemingly simple objective. However, the proven superior performance of customer-centric models strongly challenges MSV's re-emergence, suggesting that genuine value creation, not short-term extraction, drives durable success.

CANNES, FRANCE MAY 14 2010 Michael Douglas attends the "Wall Street: Money Never Sleeps" Press Conference . (Photo by Jean Baptiste Lacroix/WireImage)WireImage

Management experts persistently advocate for hierarchical "alignment," despite compelling evidence that networks of competence consistently outperform traditional structures. Hierarchies, marked by upward reporting and limited horizontal interaction, often stifle innovation and prioritize control for short-term profit. Conversely, networks foster autonomy, horizontal collaboration, and shared purpose, driving sustained value creation. The internet and AI have further empowered networks by reducing coordination costs and enhancing efficiency, making them ideal for today's fast-paced, customer-driven market. While hierarchies retain roles for legal accountability, the dominant organizational logic in the digital era is increasingly shifting towards adaptive, high-performing networks.